The accompanying chart shows the S&P 500 since January 2007 together with the volume and a 10-day exponential moving average (MA) of the volume. The moving average smoothes out daily volume volatility and helps us see the trends. In previous versions of this chart, the MA was simple, but this update has switched to the exponential variety to be more sensitive to the latest volume trend.

Note the frequent inverse relationship between price and volume — for example, the rise in volume accompanying the index decline from early January of this year to the March 9th low. Then the relationship reversed.

The question is where we go from here. The conventional wisdom is that volume is light during the summer vacation season — from the Friday before Memorial Day until the Tuesday following Labor Day. That was not the case in 2007 and 2008. Volume increased during the 2007 summer price decline. Likewise the 2008 summer volume increased with the price decline that started in the late spring.

We're now about 60% of the way through the 2009 summer season. Will this year be different? The 2009 price has made an apparent "V" bottom, with a 44.7% recovery since the March 9th low. Volume has generally moved in the opposite direction. The index price appeared range bound during the first half of the summer. But 2nd quarter earnings season seems to have renewed the rally, and the past few sessions have seen an uptick in volume.

Will the remainder of the summer bring another price-volume reversal after the excitement of earnings season wanes? Check back for future updates.